Introduction
Due to the outbreak of the Coronavirus pandemic across the globe, many households and businesses are consuming less electricity, implying a decline in the demand for coal. As many utilities cut the use of coal power, it predicts an acceleration of the worsening of the coal industry in the United States that is on a decline.
Summary of Market Conditions
Market conditions refer to factors that affect markets in a specific location. Such factors include supply and demand, demographics, and costs of living. Market conditions influence every business in an industry, even though their capability to take advantage or respond to market conditions may differ. There has been a decline in the country’s demand for coal power even before the Coronavirus pandemic (Blunt, 2020). The increase in decline during this period will hasten the closure of plants, as many people and firms will go for cheaper energy from solar sources, wind, and natural gas. Notably, before the outbreak of Covid-19, many coal companies were already preparing to close their coal production plants to reduce carbon emissions and the cost of generating power.
For instance, Southern Company that depended heavily on coal to produce electricity is shifting to renewables, natural gas, and hydroelectric power. The company is retiring its coal assets over the years. Besides, there is a decline in the use of coal in the production of electricity. For instance, the company utilized 22% of coal in its power generation in 2019 compared to 70% in 2007 (Blunt, 2020). The drop in coal use in the generation of energy is a blow to coal companies forcing them to close much earlier than anticipated. Challenges facing the coal industry and the coronavirus pandemic contribute to lower prices of coal power. Despite the government putting measures to stabilize the coal sector, such as easing barriers and environmental regulations, coal energy production continues to decline over the years.
Application of the Theory
Coal plants supply the grid with large amounts of power when there is an increase in electricity uptake. However, with the coronavirus shutdown, many office complexes, storefronts, and factories are offline, resulting in less demand for coal power. Moreover, crude oil and natural gas prices have dropped because of a supply glut brought about by a decline in energy use. Besides, the urge to reduce carbon emissions has resulted in a decrease in coal use since utilities are shifting to solar and wind power. The Covid-19 has depressed the supply of electric power, shifting energy utilization levels as most persons work from their homes.
Conclusion
According to the law of demand, other factors being constant, quantity demand, and price of a service or product are inversely related. When the price of a product increases, the people purchase lower amounts of it, and when the price decreases, more of it is bought. In this case, the coal sector faces many challenges as well as competition from renewable energy that is friendly to the environment, making companies shift to these sources. The coronavirus pandemic has also worsened coal power production due to a decrease in quantities of electricity required to run the downscaled activities by companies and businesses. As a result, there is less coal power production due to lower demand for electricity, which ultimately lowers coal electricity prices. In essence, the current economic conditions and a shift to clean sources of energy means that the coal sector will continue to decline.
Reference
Blunt, K. (2020). Coal suffers as coronavirus saps power demand. The Wall Street Journal. Web.